Tata Steel has agreed to plough more than £550m into the British Steel pension scheme (BSPS) which was closed in March.

It’s the latest step towards reducing the steel-maker’s exposure to the scheme’s £15bn liabilities, which has threatened to put its merger with ThyseenKrupp in jeopardy.

Unions say they will seek further assurances about the agreement, which would also see the steel-maker give a 33% equity stake in Tata Steel UK to the BSPS.

Members of three trade unions backed a rescue deal in February aimed at safeguarding jobs and guaranteeing investment, with the final salary pension scheme closing and being replaced with a less generous one.

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The Indian firm said yesterday that intensive discussions had been held with the Pensions Regulator and the Pension Protection Fund (PPF), leading to terms of a so-called Regulated Apportionment Arrangement (RAA) being agreed.

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Tata said in a statement: “If agreement is reached and the necessary approvals are obtained, the RAA will become effective once agreed conditions are satisfied, including the payment by a member of the Tata Steel group of an agreed settlement amount of £550m to the British Steel Pension Scheme (BSPS) and the provision of a 33% equity stake in Tata Steel UK.”

Tata said it had agreed in principle that, subsequent to an RAA, it would sponsor a closed new pension scheme which would have lower future annual increases for pensioners and deferred members than the BSPS and therefore an improved funding position which would pose “significantly less risk” to the company.

“There is presently no certainty with regards to the eventual existence, size, terms or form of the new scheme and the funding position and membership of any new scheme would be dependent on a voluntary membership transfer exercise,” the statement said.

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Union response

Community, Unite and the GMB unions issued a joint statement saying the announcement is a “stepping stone” to securing members’ benefits in a new scheme.

But they added that when workers voted to accept Tata’s turnaround plan, they did not vote to allow the firm to put the BSPS into the PPF, a Government-backed pensions lifeboat funded by a levy paid by UK pension schemes.

“On the contrary, the agreements we have reached with Tata are based on the understanding that all members will have the opportunity to choose whether to move to a new modified scheme or remain in the BSPS and so enter the PPF,” the unions said.

“This is the commitment Tata has given to the workforce and the trade unions will hold them to the promises they have made.

“The BSPS is well-funded and our experts tell us a modified scheme would provide better outcomes than the PPF for the vast majority of members and that the resources are there to pay in excess of PPF benefits on an ongoing sustainable basis.

“This new scheme must be delivered and we will be seeking further assurances to ensure that this RAA announcement leads to the choice that our members expect.”

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A PPF spokesman said: “We can confirm that the key commercial terms of an RAA have been agreed in respect of the British Steel Pension Scheme and anticipate discussions concluding in the near future.

“This would meet our published principles, including that an insolvency event of the scheme’s sponsoring employer, Tata Steel UK, would otherwise be inevitable. Any RAA is subject to a 28-day period following an agreement leading to Pensions Regulator approval and PPF non-objection.

“Following the RAA, it is anticipated that if risk-related qualifying conditions relating to funding and size can be satisfied, a new pension scheme sponsored by TSUK will be set up. Members would then be given the opportunity to move to this new scheme prior to the existing scheme being assessed for entry to the PPF.

“Members of the scheme can be reassured that we are there to protect them throughout this process and they will be able to receive at least PPF levels of compensation should they remain in the scheme and BSPS enter the PPF assessment period.”